Author: Willis Bennett

August Spot Contract

Prompt August, which had already closed below a short/intermediate – term trend line got off to an inauspicious beginning. On its first day August closed below its 50 – day SMA that it had closed above each day since May 3rd. On its second day the new prompt traded through its to date June low ($2.656 on 06/04) and then its post – Memorial Day low ($2.605 on 05/31)…and settled for the week below both of those of those lows. It is hard to put a bullish spin on that but there are a few mitigating factors. One element that should be made clear is that the behavior last week (and month) did provide an interesting range for the upcoming August contract as shown above. Similar to the July contract, there is a nice double top and now a solid test of the support zone is developing. Expect this range, which falls nicely into the range the market has maintained this spring (Continuous basis).

Weekly Continuous

The expectation was that the expiration process would continue the trend of being well offered and test the major support zone ($2.60-$2.50). It did not quite make it (the expiration day low was $2.613), before settling not so much higher at $2.628 ( a $.135/dt than June). From a technical perspective- prompt gas did test the wider zone of support between +/-$2.450 and $2.640, which included 50% and 61.8% retracement of the rally from its February low and August continued to test that zone after July was off the board.

Weekly Continuous

Been discussing the trend of the contract months that have expired during 2024 have been amply offered during their closing days (March, April and May traded the lows of their tenure on the day they went to settlement). February didn’t but lost $.443 (from high to low) over its last three days. June lost $.507 over its last four days as it fell from $2.924 to test the continuation 200 – day SMA. July would appear to be on a similar path. Expect expiring July to test the zone of support between +/- $2.450 and $2.640, which includes 50% and 61.8% retracement of the rally from its February low, its 50 – day SMA and the nearly flat continuation 200 – day SMA that held near the low of expiring June. A failure by July to weaken into expiration would indicate a change in the character and or bias of supply and demand for gas.

Changes in market internals, specifically volume and open interest, strongly suggested approaching the gas market with extreme caution from the long perspective. Prompt gas had traded higher highs with diminishing volume. The May high ($2.924) had traded with a weekly turnover of 3,378,217 contracts, the June high ($3.159) with 3,047,011contracts. At the same time July traded a textbook double top when it challenged its May high. On May 23rd 258,561 contracts traded, 200,816 when it reversed lower from the June high but lacked the buyers to push it further.